This is the worst performing IPO of 2015

Etsy’s initial public offering felt like a night at the Stork Club. But since then, the stock price of the vintage and craft online marketplace suggests that the company and its investors are headed for a Hooverville.

Last week, Etsy’s stock price dropped below its $16 offering price for the first time since its IPO. But the company’s shares have been doing terribly for a while. Shares of Etsy (ETSY) have fallen more than 50% from where they stood at the end of its first day of trading. That makes it the worst performing IPO, based on that measure, in a year when IPOs haven’t been doing all that well. The average IPO has risen 15% from its offering price this year. That’s down from 21% last year, and 40% the year before that.

I predicted that the enthusiasm for Etsy’s shares was overblown, based on the filing it made for its IPO. Since going public, Etsy’s numbers have only grown worse.

Revenue in the first quarter at the company did grow an impressive 44% to nearly $59 million. But the increase in revenue the company received from selling stuff on its website continued to slow. It was 27% in the first quarter, down from 38% for all of 2014. And that 27% was slightly slower than the 28% increase in total merchandise sold on Etsy’s site during the first quarter, meaning the transaction fees Etsy is collecting must be shrinking, but only by a little bit.

The big jump in revenue for Etsy came from selling services to people and small businesses who sell their stuff on Etsy’s website. But if sales of stuff on Etsy’s website are slowing, you would expect merchants would quickly see little benefit in paying for additional services from Etsy.

Etsy’s biggest problem, though, is that its expenses grew even faster, up 72% from the quarter a year ago, than its sales. And when that happens, you typically lose more money; except, apparently, when Etsy does the counting, probably on an abacus or something like that.

Along with its official earnings, as measured by generally accepted accounting principles, Etsy releases something called its non-GAAP adjusted EBITDA profits, which is the way it says it measures results. Unsurprisingly, Etsy says, by its profit measure, earnings were up nearly 10% in the first quarter, despite the huge jump in costs. Etsy’s actual bottom line fell by nearly $36 million.

What also grew was the gap between Etsy’s imagined earnings and its real bottom line. A year ago, the gap was $7 million. It grew to $43 million in its most recent quarter.

That might be okay for a company that, like the stuff sold on Etsy, seems to be priced for the quality you are getting. But that’s not the case for Etsy’s shares. Despite the drop, Etsy’s stock still trades at nearly 8 times its sales. That compares to just over 2 times for much larger rival Amazon, which has plans to launch a service called Amazon Handmade, which will more directly compete with Etsy.

Etsy’s life as a public company will continue to be one of hard knocks.

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